Redrawing the Map of Global Capital Flows: The Role of Cross-Border Financing and Tax Havens
Global firms finance themselves through foreign subsidiaries, often shell companies in tax havens, which obscures their true economic location in official statistics. We associate the universe of traded securities issued by firms in tax havens with their issuer's ultimate parent and restate bilateral investment positions to better reflect the financial linkages connecting countries around the world. Portfolio investment from developed countries to firms in large emerging markets is dramatically larger than previously thought. The national accounts of the United States, for example, understate the U.S. position in Chinese firms by nearly 600 billion dollars, while China's official net creditor position to the rest of the world is overstated by about 50 percent. Further, we demonstrate how offshore issuance in tax havens affects our understanding of the currency composition of external portfolio liabilities and the nature of foreign direct investment. Finally, we provide additional restatements of bilateral investment positions, including one based the geographic distribution of sales.
We thank the Becker-Friedman Institute, the Guggenheim Foundation, the NSF (1653917), the Sloan Foundation, the Weatherhead Center, William Ladany Faculty Research Fund, and the Jerome A. Chazen Institute for Global Business for financial support. We thank Javier Cravino, Riccardo Colacito, Max Croce, Stephanie Curcuru, Darrel Duffie, Kristin Forbes, Pierre-Olivier Gourinchas, Gordon Hanson, Zhiguo He, Wei Jiang, Keyu Jin, Ken Rogoff, Michael Song, Hyun Song Shin, Cristoph Trebesch, Stijn Van Nieuwerburgh, Adrien Verdelhan, Frank Warnock, Shang-Jin Wei, and Gabriel Zucman for helpful comments and discussion. We thank Amanda Dos Santos, Andrea Hamaui, Angus Lewis, Ricardo Ruiz, George Vojta, and Menglu Xu for outstanding research assistance. We offer particular thanks to Steve Kaplan for his generous help with the project. Our analysis makes use of data that are proprietary to Morningstar and/or its content providers. Neither Morningstar nor its content providers are responsible for any of the views expressed in this article, nor do the views herein necessarily reflect those of the National Bureau of Economic Research.
- In 2017, securities issued by corporations based in tax havens — mostly offshore financial centers — accounted for 10 percent of the...
Antonio Coppola & Matteo Maggiori & Brent Neiman & Jesse Schreger, 2021. "Redrawing the Map of Global Capital Flows: The Role of Cross-Border Financing and Tax Havens," The Quarterly Journal of Economics, Oxford University Press, vol. 136(3), pages 1499-1556. citation courtesy of